IGI Securities Limited – Day Break

Karachi, October 12, 2018 (PPI-OT): Oil and Gas Exploration Companies – Pakistan Petroleum Limited – PPL: Gambat South to uplift production growth with macroeconomic tailwinds in favour; ‘BUY’ maintained

We have revised our earnings for Pakistan Petroleum Limited (PPL) after incorporating FY18 financial results by +10%/5%/7% for FY19/20/21F. We have revised our earnings on the back of a) delays in production from Gambat South as Gas Processing Facility (GPF) III and IV is expected to be completed by 4QFY19 and, b) higher exploration cost during FY19 owing to dry well costs incurred already in Khanjar and Qamar,

We have also incorporated recent discoveries from Bolan East, Talagang, Yasar, Gulsher and Badeel adding nearly 1,387bopd and 18.4mmcfd of oil and gas production from FY20 onwards. We have also incorporated recent 150bpd hike in interest rate in the last two months,

We foresee PPL to post nearly 26% growth in earning in FY19. As a result, our rolled over and bonus adjusted Jun-19 target price is revised down slightly by 6% to PKR 211.5/share, offering +17% upside from last close.